New Clause.—(EXEMPTION FROM SCHEDULE A FOR OWNER-OCCUPIERS.)

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(1) Where the total income of an individual includes, or would but for this section include, any sum under Part III of the Income Tax Act, 1952, in respect of a house or tenement of which the said individual is both owner and occupier, the first hundred pounds of such sum shall, subject to the provisions of this section, be disregarded for all the purposes of the Income Tax Acts other than the furnishing of information.

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(2) No individual shall be exempted from assessment under Schedule A by virtue of this section in respect of more than one house or tenement in any year of assessment.

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(3) For the purpose of this section, a house owned by a married woman living with her husband and occupied by them shall be deemed to be owned and occupied by the husband.—[Mr. Wade.]

The purpose of this new Clause is to encourage home ownership. It is one of a number of proposals which we want to put with a view to spreading ownership as widely as possible. Some of these proposals were covered in proposed new Clauses which have not been called and I must not refer to them, so I cannot give the whole picture.

The object of this new Clause is a simple one. It is to allow exemption on the first £100 of assessment for owner-occupiers. I should like to draw the attention of the Committee to the effect of the three subsections. Their effect would be to limit the liability for Schedule A tax. The owner-occupier would not be liable for this tax up to the extent of £100 on his assessment. This would apply to one house only. If he owned other houses, he would not derive that benefit. He would only benefit from one house, and that is the house in which he lived.

Furthermore, where, for example, a house is owned by the wife and husband and wife live together in that house, and maybe the husband owns other houses, again this would only apply to the house in which the husband and wife were living. As a general principle, I am in favour of separating the wife's income from the husband's income. I think that there are a great many anomalies and injustices arising from the fact that a husband's and wife's incomes are lumped together. In this case, I think that it would be fair to deal with the one house whether owned by the husband or the wife.

I do not know—perhaps the Financial Secretary may be able to tell us—what effect this would have on the revenue. I imagine that the loss of revenue would not be very great. Furthermore, any loss of revenue would be offset by the saving in the cost of collection and the examination of complicated repairs claims. It appears to me that the work involved in examining repairs claims, which at present can be set off against Schedule A assessment, must be considerable. I never attempt to fill up my own Income Tax forms. I never attempt to make my own repairs claims. I ask an accountant to do that for me and it always seems to be somewhat complicated. Therefore, if I am not going too far
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beyond the terms of this new Clause, I would suggest that the time has arrived when we might reform our taxation and, in doing so, it might well be that we could abolish Schedule A tax altogether.

It seems that there are four categories of house owner. There is the owner of a house whose income is so small that he is not liable for tax at all and, therefore, does not pay Schedule A tax. Secondly, there is the owner-occupier with one house whose income is such that he is liable for Schedule A tax, but he may not pay it if he spends a sufficient amount on repairs. Thirdly, there is the owner owning two, three or more houses and receiving rent from the houses in which he does not live. In that case, he will pay tax in respect of the rent and it will not just be a case of Schedule A tax. Finally, there is the investment company owning a large amount of property in which case the company is assessed for profits, if it makes profits.

It appears to me that the Revenue might not lose very much if Schedule A tax were abolished altogether. However, I am not able to give any precise calculation and the hon. Gentleman may be able to enlighten the Committee on that point. Whether or not we abolish Schedule A tax, I suggest that it would be an encouragement to owner-occupiers if they were relieved of tax to the extent of the first £100.

The hon. Member for Huddersfield, West (Mr. Wade), in moving the new Clause, opined that the loss of revenue would not be very great and that thought seemed to console him as he went through his speech recommending it to the Committee. I am sorry to have to break it to him that the cost of this new Clause would be £25 million and, therefore, he will see at once that it is quite outside the ambit of any alteration to the Budget proposals which could well be made.

I meant that it would be the direct loss on revenue now received, but
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surely there might be a greater loss as a result of people investing in this kind of property more than they have done at present.

Of course, the right hon. Member for Battersea, North (Mr. Jay) is quite right in saying that if the proportion of owner-occupation increases, the consequential net loss would also increase. This was a matter which was considered with great care by the Royal Commission on the Taxation of Profits and Income, and both the majority and the minority came decisively to the conclusion, after hearing a great deal of evidence, that the beneficial occupation of a house which is assessed under Schedule A is a proper subject of taxation and that there would be unfairness between one taxpayer and another if that aspect of taxable capacity were ignored.

So, both for the reasons of principle, which are firmly set out in the Royal Commission's Report, and also because on financial grounds it would be quite impracticable to make a change of this magnitude, I must ask the Committee to reject the new Clause.

I am disappointed by the Financial Secretary's quick reply to the speech made by my hon. Friend the Member for Huddersfield, West (Mr. Wade). It seems to me that this is the kind of thing which should appeal to the party opposite, and I am not at all disconcerted by the fact that it may cost £25 million. That seems to me to be all the more reason why the party which supports the idea of a property-owning democracy should wish to give some tax concession to forward that idea.

After all, this so-called fairness between one taxpayer and another has been weighted in exactly the opposite direction. As the Financial Secretary will, I am sure, readily appreciate, everything has been weighted in the direction of the tenant who has a subsidised house, subsidised at the expense of the Government, and any person who has sought to
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buy a house for himself in recent years has been unfairly treated as between one taxpayer and another.

4.30 p.m.

Today, very many people in Bolton are on holiday. It is Bolton holiday week. When I was going round my constituency, two or three weeks ago, and asking my constituents where they are going for their holidays, I found that a surprising number were not going away at all this year. The reason was not that they had not saved up the money; they had saved just as much as they had on previous occasions. They were not going away because, during the last twelve months, Bolton Corporation has introduced a differential rent scheme, and large numbers of tenants of corporation houses in Bolton are now paying a full economic rent for their houses, which they have not had to do previously for a long time.

Apparently, as a result of this, many workers who had never before thought of owning houses of their own have now decided to forgo their holidays, presumably to provide deposits and then, supported by building societies, to buy their own houses.

Hitherto, the Government have provided large sums of money to subsidise tenants, and all that we are saying here is that if it is thought to be a good thing to own one's house, now that we have stopped or, at any rate, greatly reduced subsidies to tenants it is surely quite proper to use the taxation instrument to encourage ownership.

I would add the further point that at this time, when we are supposed to be encouraging the ownership of houses, interest rates are extremely high and that it is very difficult for people to provide the money to start their ownership. I would have thought that a concession of this type, even if not made to the full extent proposed in the Clause, would have recommended itself to the party opposite and to the Treasury. We are extremely disappointed with the Financial Secretary's answer.

I am not enamoured of the precise wording of the Clause, but it seems to me that the Financial Secretary has overlooked one consideration which the Government should bear in mind, namely, that some form of
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encouragement should be given to would-be owner-occupiers. The Financial Secretary might consider abolishing Schedule A in respect of owner-occupiers occupying properties where the Schedule A assessment is less than, say, £80. That means that we should limit this concession to people who want to buy small houses, and so make it easier for them to do so. We should leave the actual income of the person buying the house out of consideration, because that is not the relevant issue.

The real issue here is the encouragement of owner-occupiers of small residential accommodation. I am not going to say that a person owning a house whose Schedule A assessment is £150 or £200 necessarily deserves the concession provided by the Clause. The Financial Secretary grimaced just now, but there are houses in respect of which the Schedule A assessment is fairly substantial, the reason being that the house is a large one, occupied by a wealthy person.

I am not suggesting that a person in that category should receive the benefit of this concession, but I should like the Financial Secretary, either now or later, to try to persuade the Government to consider the real need to encourage the owner-occupation of small houses, because it will be very much cheaper to make this kind of concession than to go in for lavish subsidies which may be necessary but which entail considerable expenditure of public funds.

I hope that although the Financial Secretary has dismissed the Clause the fundamental point behind it will not be overlooked by a Government which claim to be advocates of a property-owning democracy.

I did not intend intervening in this debate, but I have just heard the most amazing defence of owner-occupiers. Apparently the Clause seeks to exempt me from paying Schedule A tax in order to encourage me to be what I am, namely, an owner-occupier. I do not ordinarily seek to divulge my personal affairs, but on this occasion I think I should divulge a little, because I have heard such wonderful platitudes put forward on behalf of owner-occupiers, and I have been very impressed by the tremendous sympathy which the hon. Member for Huddersfield, West (Mr. Wade) has
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expressed towards me and the tremendous amount of relief that he wants to give me.

The hon. Member wants to encourage me to continue to be an owner-occupier, so he proposes to relieve me of the obligation to pay Schedule A tax, which costs me £3 a year. The interest which I have to pay to my building society, at 6 per cent., is costing me £93, and if someone wants to help me, for goodness' sake let him leave the £3 alone—I do not mind paying that—and relieve me of the £93 interest on my loan. I can assure the hon. Member that for all his excellent exposition of the advisability of abolishing Schedule A tax, it affects me only to the extent of £3 a year, so I am not very impressed.

I had to make those few remarks as one who enjoys the privilege of owning my house. To me, it is a privilege, because in the modern industrial society a house is the only place where there is no employer, board of directors, or sanitary inspector to tell a person what he must do. A person who owns his house can make sure that no sanitary inspector is required. To that extent owner-occupation is a wonderful thing. We from Wales are brought up to try to buy our own houses. We are told that there are two monkeys on the roof—one the money lender and the other the landlord—and that we should keep both these monkeys away if we possibly can. With our low incomes, however, and with our families, the only way we can buy houses is by having one monkey on the roof—the monkey from the building society.

Let us abolish Schedule A tax by all means—but I want something to be done to reduce interest charges. We owner-occupiers are much more concerned with reducing interest charges than with abolishing Schedule A tax.

This is the second sortie of the Liberal Party in their field exercises for today. It is probably pure coincidence that the Liberal Party has been moved to so great an activity on the day that the new hon. and gallant Member for Dorset, North (Colonel Glyn) has been sworn.

I am sure that my hon. Friends sympathise with the Liberal Party's desire to test the sincerity of the slogan, "A
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property-owning democracy" of the party opposite, but we are bound to support the Financial Secretary in this matter. It surprises me that the hon. Member for Huddersfield, West (Mr. Wade) did not refer to the paragraph in the Royal Commission's Report which not only deals with some of the considerations involved, but also gives him the answer to the question that he asked, namely, that concerning cost. In fact, the cost is referred to in paragraph 827 of the Final Report of the Royal Commission.

The hon. Member for Huddersfield, West said that the Clause was intended to encourage home ownership. I wonder whether he has considered what effect the concession would have upon the price of houses. It seems to me that it would send up the price of dwelling-houses for owner-occupation. It might also have the effect of sending up the price of newly-built houses for owner-occupation. In that event, there would be widespread capital gains to existing owner-occupiers and probably excessive profits to those who have houses to sell or to build for owner-occupation.

The Committee will bear in mind the fact that a tax on a dwelling-house occupied by the owner is reckoned as part of his total income for tax purposes, and if he is not due to pay Income Tax by reason of the amount of his total income, or the amount of his allowances to be set against that income, he pays no tax under Schedule A.

The real point here is whether we should tax the amenity value, the value of beneficial occupation of a house which is occupied by the owner. It was on these matters that the Royal Commission pronounced judgment. I confess that at one time I flirted with this heresy that there was no more justification for taxing the amenity value of a house than of a motor car, or of pictures, or furniture. But the Royal Commission dealt with that theory and, in paragraph 827, could not ignore the principle
that taxation should be adjusted to the relative capacity to pay of different taxpayers. There can be taxable income which is not received in cash. Living accommodation is a necessity of life and a taxpayer who does not own it is obliged to rent it; consequently an owner-occupier with a given income, paying no rent, has a larger taxable capacity than has a tenant with the same income out of which he must meet liability for rent.914
That is a powerful argument in favour of retaining the Schedule A charge on owner-occupiers.

There is another aspect of the matter. Where there is a charge on the house in the form of mortgage interest no tax is payable on the outgoings. We all wish to see mortgage interest rates reduced, but interest is chargeable against the taxable value of the dwelling-house where the owner-occupier has a mortgage. So for these considerations, apart from the cost of the concession and the disparity which it would create between those with the resources to buy a house to live in and those who must continue to rent a house for which they get no tax relief whatever, I think that we on these benches are bound to say that we cannot support the new Clause; and that a property owning democracy will have to be achieved by other means.

—quite apart from the financial burden. But I am in the difficulty that I am proposing a number of new Clauses, all of which involves some tax relief. While I should like to see the Chancellor grant relief in this respect, there are other matters which I regard as even more urgent. Therefore, in the hope of better things to come, I beg to ask leave to withdraw the Motion.